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Why Does 'IT' Cost So Much? (page 4 of 4)

  • Sunday, August 15 - 2004 at 14:20
Whether you have a small or a large global business, you must have systems that are available 24/7.

Disaster Management. Disaster Management ensures that there is a process from disaster to recovery in a predictable time.

Security Patch Management. This process guarantees that when a security patch is available from a vendor, it is applied to the production systems in a known period of time.

Audit Management. Audit Management ensures an audit is performed at least once a year. Audits can be specialized or may adhere to standards such as the SAS70, (Statement on Auditing Standards No. 70) an internationally recognized auditing standard developed by the American Institute of Certified Public Accountants

Capacity Management. This is the process of making sure there are adequate hardware and software resources to deliver a specified level of application performance.

Resource Management. Resource Management ensures there is a process for adding and shedding infrastructure (people and computers) as load increases and decreases.

Update Management. This is the process of ensuring your software is updated at least once a year.

Production Assessment. This process determines whether changes have degraded the performance, availability, or security of production systems.

Escalation Management. Escalation Management ensures there is a process from problem definition to resolution.

Proactive Problem Management. With Proactive Problem Management, you establish a process to take high-priority fixes from the software company and apply them in a predictable amount of time.

Establishing the process is critical, but just as important is the maturity of the process. Is it an ad hoc process, meaning that if your system administrator or DBA comes into the office the process works, but if they're out that day, who knows? Is it a defined process, meaning that it is documented?

Is it repeatable, meaning you are using this process 10 to 100 times per year? Is it optimized? Are you using data to change and improve the process? And finally, is it automated? Ultimately, any repetitive process can be automated—that's the key to higher quality and lower cost. Use the "Key Management Process" checklist (Figure 2) below to find out where you stand.



Figure 2: How mature are the management processes in your enterprise? Check off the appropriate column in each row to find out where you stand.


The challenge is clear. IT costs are large and dominated by the cost of managing the existing software systems. The costs can be broken down around ensuring the availability, security, performance, and problem and change management of complex software systems. Cutting costs is easy, but the key is increasing the effectiveness of the delivery of service.

Core Versus Context
The challenge facing the IT organization, which is the same problem facing the entire corporation, is that too much time is being spent on tasks that are context, too little on tasks that are core. The task is core when its outcome directly affects the competitive advantage of a company. For core activities, the goal is to differentiate as much as possible and to assign the best resources to that challenge.

The goal for context tasks is to execute them as effectively and efficiently in as standardized a way as possible. This is the central theme of Geoff Moore's book Living on the Fault Line. He writes, "Differentiating on context is the single biggest waste of resources in Fortune 500 operations." Some companies understand the difference, Moore continues: "For Chuck E. Cheese, the actual pizza is context, for Round Table, it is core." Moore argues that a deeper emphasis on core versus context has emerged as the key distinction in allocating resources to improve shareholder value.

But the core-versus-context argument goes even further. Managers know that while we might try to "do it all," in the end, dealing with the issues brought up by managing context always influences our focus on the core. "Stick to your knitting" might be a simple timeworn phrase, but it is no less important today as we head into global markets, where differentiation on value is the key competitive advantage.
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Notes and Media Contacts »

Timothy Chou, Oracle Outsourcing president, is also a book and magazine article author.

The article is adapted for Profit: Oracle's E-Business Magazine from Oracle Outsourcing President Timothy Chou's upcoming book, Next-Generation Outsourcing: Software as a Service.

Chou, a six-year Oracle veteran, wrote Next-Generation Outsourcing to provide executives and business managers with alternatives to managing and maintaining the information-technology systems on which their companies depend.

In this chapter, Chou puts IT costs in the context of business imperatives and challenges enterprises to move from system-maintenance mode to innovation.

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